Quantity Supplied Equals Quantity Demanded Flashcards, test questions and answers

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What is Quantity Supplied Equals Quantity Demanded?

Quantity Supplied Equals Quantity Demanded is an economic principle which states that the quantity supplied in the market is equal to the quantity demanded. This concept is based on the idea of equilibrium, which suggests that when supply and demand are in balance, there will be no shortage or surplus of goods. In order for this to occur, it must be assumed that all other factors remain constant and prices reflect what buyers are willing to pay for a certain good or service. If any of these conditions change, then supply and demand will be out of balance and a shortage or surplus can occur. The law of Supply and Demand explains how changes in price affect the quantity supplied and demanded in a market economy. When prices rise, producers tend to increase their production while consumers will buy less because they cannot afford as much at higher prices. As a result, when prices rise, the quantity supplied rises while the quantity demanded falls; this causes an imbalance between supply and demand until prices stabilize again at a new equilibrium point where both sides are equal once more. Similarly, when prices fall, consumers can buy more but producers may choose not to produce as much because it is no longer profitable; thus leading to an imbalance between supply and demand until new equilibrium point where both sides are equal once more is established through changes in price. In sum, Quantity Supplied Equals Quantity Demanded states that when all other things remain constant (i.e., no external influences such as government policies or changes in consumer tastes), then suppliers will always meet consumer demands by supplying exactly what they need at whatever price prevails in the marketallowing markets to reach equilibrium naturally over time without intervention from outside forces like governments or large corporations who might distort competition with monopoly power or by manipulating pricing structures artificially for their own benefit. With this understanding of how markets work under normal conditions comes greater confidence about predicting future trends based on current dataallowing us all to make better decisions about what products we should produce/purchase today so that our businesses/lives can benefit tomorrow.